Judge delays hearing on Hontex refund
Shareholders in fabric maker Hontex International Holdings will need to wait at least a few more months before they can get their money back from the beleagured company.
High Court Judge Jonathan Harris yesterday decided to hold a hearing on July 22 to sort out how and when the court should intervene in cases related to corporate misconduct and compensation for investors.
The Securities and Futures Commission has asked the court to order Hontex to refund the HK$1 billion it raised in its initial public offering of December 2009 as the company had allegedly made false financial statement in its listing prospectus.
The SFC wants the court to make the company compensate all small shareholders who held Hontex stocks at the time it was suspended from trading on March 30 last year. This includes both investors who bought the shares in the IPO as well as those who bought shares in the secondary market. The SFC also holds that if the IPO proceeds are not enough to cover all payments, Hontex must pay the difference.
The judge said he doubted whether the court should intervene in such situations. He said the company could convene a shareholders' meeting to chart out a voluntary refund arrangement.
According to the judge, if the SFC wants the court to issue a refund order according to a provision in the Securities and Futures Ordinance of 2003, it may first need to go to the Market Misconduct Tribunal or pursue other legal processes to determine if the company has committed any misconduct.
The SFC lawyer pressed for an immediate refund order, to which Hontex objected. Justice Harris agreed that there should first be a hearing on the appropriate jurisdiction in such circumstances.
The SFC suspended trading of the Fujian-based fabric maker's stock on March 30 last year, 64 days after its listing, and won a court order to freeze the HK$997.4 million the company had raised through its IPO.
The freeze came after KPMG, Hontex's auditor, told the SFC that senior KPMG manager Leung Sze-chit had allegedly accepted a HK$300,000 bribe from an agent of the company.